Goldman prices latest in Brazilian real-linked notes; Citigroup prices Bank of America-linked notes

By Sheri Kasprzak

New York, June 13 - Heading up Friday's structured product action, Goldman Sachs Group priced a currency-linked note linked to the Brazilian real, among other currencies.

These notes, however, are all pitted against the euro, a departure from recent offerings that have been countered against the dollar.

Goldman priced $28.298 million in two-year notes linked to a basket that includes the real, the Russian ruble, the Indian rupee, the Malaysian ringgit, the Singapore dollar, the Mexican peso, the Australian dollar and the Norwegian krone.

"This really isn't such a surprise," said one market insider.

"The euro has experienced some major declines lately and the other currencies have showed strength. The real and the ringgit in particular have shown some marked improvement."

The zero-coupon notes pay par at maturity if the return on the basket is less than 2%. If the return is equal to or greater than the 2% threshold return but less than 9.33%, the investors receive the product of the step-up percentage times the face value of the notes. If the return is greater than or equal to 9.33%, the investors receive the product of the net basket appreciation times the participation factor times the value of the notes.

RBC, JPMorgan, others link to real

Goldman's notes weren't the only ones this week linked to the Brazilian real.

Banks like RBC Capital Markets, JPMorgan Chase & Co., Banc of America Securities and Lehman Brothers, among others, announced plans to price notes linked to the real as part of currency baskets. Those notes, however, were linked against the dollar.

"With notes like this, the question really isn't how strong the real is; it's how weak the dollar is," noted one market source earlier this week.

"The real is experiencing some decent strength right now, but when you compare it to weakness in the dollar, it really becomes a strong strategy."

The RBC notes, in fact, were linked solely to the real. The zero-coupon principal-protected notes have a two-year term and pay the principal amount plus par times the percentage change in the real times the 135% participation rate. The notes are expected to price June 26.

Banc of America has plans to price notes with some of the currencies included in Friday's Goldman offering. That basket includes the real, peso and ruble, as well as the Turkish lira.

Citigroup prices ELKs

In other structured products news Friday, Citigroup Funding Inc. priced $17,266,980 in Equity LinKed Securities linked to the stock of Bank of America Corp.

The 5% ELKs pay a cash amount equal to the product of the exchange ratio and the final share price, assuming the stock of Bank of America is less than or equal to the $21.36 threshold price up to and including the fifth trading day before maturity. Alternatively, the investor will receive $29.36 in cash.

The investors receive a cash amount equal to the product of the exchange ratio and the final share price, assuming the final share price is greater than the $37.3606 cap price. The investors may also receive a cash amount equal to the product of the exchange ratio, the final share price and a ratio equal to the cap price divided by the final share price, assuming the final share price is greater than the $37.3606 cap price.

The notes are not principal protected.

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